CRA International, Inc. (NASDAQ:CRAI) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
CRA International, Inc. (NASDAQ:CRAI) stock is about to trade ex-dividend in 4 days. If you purchase the stock on or after the 23rd of November, you won't be eligible to receive this dividend, when it is paid on the 11th of December.
CRA International's next dividend payment will be US$0.26 per share, and in the last 12 months, the company paid a total of US$1.04 per share. Calculating the last year's worth of payments shows that CRA International has a trailing yield of 2.3% on the current share price of $45.65. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for CRA International
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately CRA International's payout ratio is modest, at just 32% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 42% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, CRA International's earnings per share have been growing at 16% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. CRA International has delivered 17% dividend growth per year on average over the past four years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Has CRA International got what it takes to maintain its dividend payments? CRA International has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.
On that note, you'll want to research what risks CRA International is facing. For example - CRA International has 1 warning sign we think you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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